European Justice Lambasts Spain´s Mortgage & Foreclosure Law

24/07/2014 – Cinco Dias

One after another, sentences by the national and the European courts question correctness in one of the basic pillars of the Spanish mortgage market: the quality of a collateral, estimated on basis of the dwelling value and the patrimony in purchaser´s possession.

The almost impossible to avoid commitment allowed the banks to offer very interesting lending conditions, compared to the international markets, which brought them a lot of savings, mostly from Germany and France. But for the bubble burst and surge in default, many disputes over mortgage loans end up in courts. And judges came to a conclusion that the Spanish eviction system underprotects  the debtors and provides too many advantages for financial entities.

The latest skyrocketing criticism from the European Court of Justice concerns the obligation to relax the eviction process by Spanish banks. Due to another sentence given in March 2013, Spain´s Prime Minister Mariano Rajoy was forced to make amendments in the effective law to block massive throwing people on the streets.

The changes approved two months later in the Law 1/2013 were supposed to resolve the contradiction between Spanish legislation and the European requirements on protection of the consumer law.

However, the truce did not last long. Last week, the Court arrived with a complaint about failing to meet the previously set requirements. Moreover, now judges accuse the Spanish Government of permitting to breach the European Union Charter of Fundamental Rights.

The new verdict cancells the regulation established in 2013 as “it put the cosumer-debtor in an inferior postion”. To justify, the authority gives an example of the loss of the trial process chance by a client if their claim about an abusive clause in the mortgage contract rejected in the first instance. In turn, banks may challenge the decision if the court admits right to the consumer.

Original article: Cinco Días (by Bernardo de Miguel)

Translation: AURA REE

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